(January 3- 12: 50 ET) – An early surge on Wall Street subsided after a smooth transition into 2000. The purchasing managers’ report, released this morning, foretells continued growth in the manufacturing sector. It raised fears among traders that the U.S. Federal Reserve will raise interest rates to hold off inflation.
At midday, the Dow Jones industrial average was down 153.58 at 11,343.54. The S&P 500 index was down 23.37 at 1,445.88. The Nasdaq was down 53.05 at 4,016.26, having given up an early gain of 123 points. The good news for stocks hurt the bond market. It dropped as investors bet that the Fed will return to a policy of higher interest rates.
The Fed raised rates three times in 1999 in an effort to stave off inflation, but opted not to raise rates for a fourth time at the close of 1999 in an attempt to ensure a stable monetary system in the new year. Analysts now believe the Fed will raise rates as soon as February . 1, when its Open Market Committee next meets.
-IE Staff